LONDON / RankWire.AI / – UK inflation accelerated in July, driven by rising household energy expenses that pushed consumer prices to their highest annual rate since March. The Consumer Prices Index increased by 2.9% compared to the previous year, up from 2.6% in June. On a monthly basis, prices grew by 0.3%, surpassing the 0.1% rise seen in July last year. The Office for National Statistics indicated that housing and household services contributed most significantly to the annual inflation increase.
The broader CPIH inflation measure climbed to 3.1% in July from 2.8% the month before. CPIH accounts for costs related to owner-occupied housing and Council Tax. Inflation in housing and household services shot up to 4.1%, compared to 2.7% in June. Gas prices jumped 14.7% during July after decreasing 7.2% in the same period last year. Electricity costs rose 3.6%, reversing a 3.8% decline recorded in July 2025.
This increase followed a 13% rise in the household energy price cap for July through September. Ofgem stated that this adjustment raised the annual expenditure for a typical dual-fuel household paying by direct debit by £221. Under the previous typical-consumption benchmark, the annual cost reached £1,862. The rise in wholesale gas prices contributed to the cap increase. The adjustment in regulated energy rates directly impacted July’s inflation figures, as households faced higher gas and electricity bills.
Household expenses drive July’s price increase
Several other consumer sectors also saw stronger annual price rises in July. Prices for furniture and household goods increased by 1.0% from the previous year after falling 0.2% in June. Clothing and footwear inflation rose to 0.5% from negative 0.5%. Meanwhile, food and non-alcoholic beverage inflation eased to 1.3%, marking its lowest annual rate since September 2021, which lessened some of the broader upward pressure on consumer prices.
Transport contributed the most to reducing the annual inflation rate. Transport inflation slowed to 3.6% in July from 5.7% in June. During the month, diesel prices dropped by 8.8 pence per litre to an average of 167.6 pence, while petrol prices decreased by 3.1 pence to 152.2 pence per litre. The annual inflation rate for motor fuels declined to 15.5% from 21.3%. Additionally, airfares increased by 11.7% between June and July, which is below the 30.2% rise seen a year earlier.
Core inflation holds steady as services slow down
Core CPI inflation remained unchanged at 2.6% in July, matching June’s figure. This core measure excludes energy, food, alcohol, and tobacco. Goods inflation increased to 2.2% from 1.7%, while services inflation decreased slightly to 3.4% from 3.6%. The overall CPI rate stood 0.9 percentage points above the UK’s 2% inflation target. The data indicated that increases related to energy significantly contributed to July’s acceleration, while many other inflation indicators experienced only modest changes during the month.
CPIH services inflation stayed at 3.6%, with core CPIH nudging up to 2.9% from 2.8%. Housing and household services continued to be the primary drivers of CPIH inflation. Lower inflation in transport helped counterbalance some of the rise caused by higher energy costs. Food prices also exerted less upward pressure than in previous periods. Overall, the July report highlighted a notable divergence across key categories, with gas and electricity costs pushing headline inflation higher, while transport and food prices restrained the overall increase.